Suppose that the ABC Corporation has a production (and sales) capacity of $1,000,000 per month. Its fixed costs---over a considerable range of volume----are $350,000 per month, and the variable costs are $0.50 per dollar of sales.
a. What is the annual breakeven point volume(D')?
b. What would be the effect on D' of decreasing the variable cost per unit by 25% if the fixed costs thereby increased by 10%?
c. What would be the effect on D' if the fixed costs were decreased by 10% and the variable cost per unit were increased by the same percentage.